How will State Farm's Rocket Mortgage alliance impact consumers?
The partnership has the potential to be a big deal for both companies and their customers, says J.D. Power.
What if insurance and mortgage solutions were available in a one-stop shop?
State Farm and Rocket Mortgage by Quicken Loans are making that a reality with their recently announced alliance.
In the partnership, Rocket Mortgage is creating new technology that will allow State Farm agents to provide Rocket Mortgage loans, including conventional Fannie Mae or Freddie Mac, FHA, VA, USDA, and jumbo mortgages, to customers as a licensed loan originator.
Sure to appeal to millennial consumers, who prefer easy and efficient modes of purchasing, the alliance opens several opportunities — and a few challenges — according to J.D. Power.
Potential challenges
“Pairing the digital capabilities of the Quicken Loans and the Rocket Mortgage platform with the advice and guidance of a State Farm agent to answer questions and guide customer, particularly first-time buyers, through the process should be very appealing to customers,” says Robert Lajdziak, senior consultant, insurance intelligence, at J.D. Power. “However, one challenge may be that first-time buyers, who tend to be younger customers that prefer digital, may not realize they want access to advice until it is too late.”
For price-sensitive millennials, cost is sometimes a barrier, and questions remain as to how State Farm and Rocket Mortgage will price their two channels, including the pricing insurance customers will receive if they also originate a mortgage loan through State Farm, says J.D Power,
Furthermore, the announcement continues a trend toward the blurring among financial services providers where new entrants and products are coming to market. To become a licensed loan originator, insurance agents will have to undergo complex training and education, as borrowers require varying degrees of education about the loan process and product options, which could be a challenge for agents with no prior mortgage experience.
“Insurance agents often resist selling products outside their expertise, of which mortgage loans may fall into; however, the Rocket Mortgage platform may make it so easy for agents that the incentive structure [for the agent] is less of a barrier,” Lajdziak says. “Progressive has been highly successful selling policies through independent agents because they created a simple agent platform that is easy to use and saves time.”
A potential win-win for millennials
Despite the challenges, the partnership presents a big opportunity to State Farm, which has a smaller proportion of younger customers. Millennials are already attracted to Rocket Mortgage’s digital platform, so adding the expert advice of an insurance agent to the mix is sure to appeal to those in the homebuying process.
And while homeownership among millennials and Gen-Y has remained relatively low, more and more are entering the market, making them prime targets for growth for both companies, explains Lajdziak.
“The digital platform paired with the advice and guidance of an agent could be an incredibly effective combination to attract the millennial market who are just beginning to buyer homes and therefore need a homeowners policy,” he continues. ”Quicken Loans provides the tech that makes this often complex process easy for the customer and State Farm provides the network of agents to provide advice to customers who want a little extra guidance. Younger customers certainly do prefer a digital process but when it comes to large decisions (or purchases) they continually seek validation for what they may have researched online.”
Related: